chp 15

Question 1

monopoly

Answer 1

a firm that is the sole seller of its market

• a monopoly is marginal

Question 2

natural monopoly

Answer 2

rises because a single firm can supply a good better than two or more could

Question 3

MR

Answer 3

is the additional revenue generated from producing additional output

Question 4

a monopolists MR is always ____ than the price

Answer 4

less

Question 5

when a monopolist increases the amount it sells it has two effects :

Answer 5

1) output effect : more output is sold increasing the TR
2) price effect : falling price led to reduction in TR

Question 6

like a competitive firm a monopoly maximimizes profit by producing the quantity where ________

Answer 6

MR=MC

Question 7

unlike a competitive firm a monoplies firms price exceeds its marginal revenue. so…. its price ________ marginal cost

Answer 7

exceeds

Question 8

a monopolist’s profit-maximizing level of output is _____ the level that maximizes the sum of producer and consumer surplus. if opposite then monopoly causes ___________ similar to those caused by taxes

Answer 8

1) below

2) dead weight loss

Question 9

price discrimination

Answer 9

charging customers different prices for the same good based on buyers’ willingness to pay

Question 10

in extreme cases of price discrimination dead weight loss will…

Answer 10

disappear

Question 11

policy makers can respond to the inneficeincy of monopoly in four ways :

Answer 11

1) antitrust laws
2) regulate prices
3) turn monopolist into govt enterprise
4) if market failure is deemed small compared to imperfection if policies, then they can not do anything